Nirmala Sitharaman’s last full budget before the parliamentary poll next year and nine State polls this year was expected to enhance the feel-good factor. Media pundits had built up hopes of a middle-class budget, given that this class of voters had been ill-served in the previous budgets. There was also hope of a much higher infrastructure spend, especially by the Railways and on roads and highways. On both counts there is a positive provision in the budget. Fiscal consolidation and a stepped-up capital expenditure too was supposed to be on the Finance Minister’s agenda. However, on Wednesday morning when she unveiled her fifth annual offering in a row, its greatest strength was that it gave in bits and pieces to almost every section without giving anyone to be overly enthused. This niggardly approach to budget-making has left everyone half-pleased, evoking a sense of relief that at least she had not dipped deep into anyone’s pocket. The biggest talking point would be the increased no-tax limit for the middle-class voter. Annual income up to Rs 7 lakh is to be fully exempt. Earlier the tax-free slab ended at Rs 5 lakh. Tax slabs have been pared down from the earlier 7 to 5. Highest income tax after surcharge too has been reduced from 42.7% to 39%. There are no changes in the old tax regime. Also, ITR processing time has now been reduced to 16 days. Deposit limit for senior citizen in various designated savings schemes has been doubled from the earlier Rs 15 lakh to Rs 30 lakh. Given the slowing rate of growth in various official savings instruments, the new ceiling can help reverse the trend. Happily, Ms Sitharaman has been able to contain deficit for the current fiscal at 6.4%. Given the fall-out of the pandemic and the Ukraine war, containing fisc at this level while distributing cost-free food to over 80 crore Indians underlines a prudent management of the economy. She has fixed a target of 5.9% for fiscal deficit for the coming financial year and set a target of 4.5 for 2025-26. Robust tax and GST collections due to increasing digitalisation of the economy and a greater compliance have helped contain fiscal deficit despite higher expenditure on food and fuel post-pandemic.
Balancing Budget | Cartoon by Mika
The budget has stepped up the outlay for the railways and roads, the drivers of growth in the absence of much private sector spending. Fifty small and mid-level airports and aerodromes, a renewed thrust on green energy, digitalisation, 5-G in the telecom sector, tax-freedom for micro, small and medium enterprises with up to Rs three crore annual turnover are salutary measures, indicating government’s approach to incentivising employment in the unorganised sector. The Prime Minister’s aversion to what he called “revadis” comes across in the budget, with no section singled out for cash handouts. Even the expected increase in the PM Kisan Nidhi from Rs 6,000 per annum, if for nothing else than to neutralise the impact of inflation since its introduction five years ago, has been avoided. Clearly, the decision to provide foodgrains to over 80 crore people free of cost through the nationwide network of fair price shops has left very little money for other freebies.
Given the global headwinds, with most Western economies staring at a sharp downward trend, if not outright recession, and the continuing war in Ukraine, India’s economy stands out. It is still growing at a decent clip. Even China is in the grip of a slowdown and may not grow more than 3-3.5% this year. While the global slowdown would put pressure on exports but it may also attract higher levels of foreign investment in new tech industries to India. To make the PLI scheme further attractive a higher provision was made in the budget. As we said, the thrust of the budget was so diffuse that it left observers looking in vain for one big idea. But clearly she did not want to rock the vote in a year when nine states elect new Assemblies and in mid-2024 the Modi Government goes to the people for a fresh mandate. Playing safe was the name of the game and the FM has stuck to her brief very well.
Meanwhile the sharp volatility on the share markets, with indices going up early in the morning only to drop a few hours later, would suggest that the budget hasn’t exactly set the Yamuna on fire. Also, a handful of high net worth individuals may have helped salvage Adani’s follow-up issue but the bloodbath in the Adani shares later in the day underlines the creeping correction the share markets might be in for in the coming days. The fear is the Adani shares might depress the overall market sentiment. That fear is not entirely misplaced.
